BMO's Porter: “Your home made more than you did last year”

BMO's Porter: “Your home made more than you did last year”

The Bank of Montreal’s chief economist put into perspective the staggering rate of growth in residential real estate prices in Canada’s most in-demand cities over the past 12 months.

“Your home made more than you did last year,” the BMO’s Douglas Porter said, as quoted by The Globe and Mail.

And the increase is showing no signs of stopping any time soon, taking the trends in Vancouver and Toronto into account.

“With supply in the two hot markets extremely tight, rock-bottom interest rates likely to stay on hold for an extended period, and other policy makers only now beginning to test the water, prices may push even higher through the rest of this year,” Porter explained. “Looking further out, the recent sharp acceleration in prices raises the risk of an ultimate hard landing.”

According to the latest numbers from the Canadian Real Estate Association, the average sale price of a home in Canada increased by 11.2 per cent year-over-year in June 2016, up to $503,301. Meanwhile, the MLS home price index grew by 13.6 per cent in the same period, up to $564,700.

“In contrast, average weekly earnings among all industries, including overtime, over the past year were $953.16. That translates into annual pay of $49,565. In other words, for the typical Canadian, your home made more than you did last year. And that pile of bricks (or lumber, or plaster, or glass) just sat there, while you had to grind it out every weekday and maybe more,” Porter stated.

To compare, sales volume declined by 0.9 per cent in June from a month before, although it rose by 5.2 per cent year-over-year.

“While home sales activity and price growth are running strong in B.C. and Ontario, they remain subdued in other markets where home buyers are cautious and uncertain about the outlook for their local economy,” CREA president Cliff Iverson said.